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Are you nearing retirement?

  11/17/16 6:38 AM

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What is the most dreadful thing about retirement? For most, it would be living a life dependent on your children for meeting your personal expenses. This can happen if you do not make any provisions to receive a fixed and regular income when you are retired. Here, we tell you how annuities can help you to plan your retirement income.

Your financial needs once retired

You need a stable amount of cash flow every month/quarter/year to live life on your own terms without having to depend on your children for money. You or your spouse may need a lot of care for which you may need to hire a professional caretaker. Apart from this, you may have to go for regular medical check-ups. All of this can be taken care of by investing in the right annuity schemes.

What is an annuity plan?

An annuity is a kind of pension product that gives you a regular cash flow till the time that you are alive. It is a plan in which regular income is paid to you in return for a lump sum payment made by you at the time of initiation of the policy. The benefit of an annuity plan is that you get a regular income long after your working years are over.

A long-term security plan

With interest rates being uncertain, as a senior citizen, you need something that can give you guaranteed returns for life. Fixed deposits are for short-term and as such do not provide security for the longer-term. With an annuity plan, you can lock-in your funds such that you receive an assured sum every year/quarter/month for life.If you invest in fixed deposits for say, 3 years and interest rates fall by the time your deposits mature, you will have to reinvest your corpus at the lower rates. It does not give you the option to lock in the rates for a longer period of time. Annuities give you the advantage of locking in a particular rate of interest for life, irrespective of interest movement.

Annuity options

Annuities are broadly classified as immediate or deferred annuities. Deferred annuities start the cash flow after a particular period whereas immediate annuities start the cash flow from the immediate year following the one in which you have paid the lump sum, single premium. Some plans also have a principle premium-return clause which means that on your death, your spouse will get the entire premium paid by you in lump sum and the policy will terminate. You are guaranteed income for life and your spouse, lump sum after your life.

If you have crossed the age of 40 or are nearing the age of 60, you would do well to invest in an annuity plan. This plan would ensure that you can live your life on your own ‘income’ without having to work a day for it.

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